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5 Hidden Earnings Bargains Worth Buying Now

BALTIMORE (
Stockpickr) -- If I told you stocks were cheap right now, you'd probably think I was crazy.

After all, equities have been in the midst of a broad-based rally for the last few years, and the venerable
S&P 500 index finally hit new all-time highs last week. Price action like that doesn't exactly go hand-in-hand with bargain valuations on Wall Street, but in fact, some stocks are looking downright cheap in this environment.

One of the biggest reasons for that is earnings. While stock prices have been moving swiftly upward since 2009, earnings have actually moved in lock-step with stock prices, justifying the loftier cost to buy shares for your portfolio. As I write, the S&P's average price-to-earnings ratio, a measure of how much investors are paying for every dollar of a firm's earnings, sits at 15.4.

That's well below the index's average P/E reading of 18.8 over the last 25 years.

But take out one big factor from P/E, and the "stocks are cheap" story gets even more interesting; I'm talking about cash. As I write, U.S. corporations are sitting on record cash reserves, a balance sheet number that totally skews the valuation numbers for firms with lots of dollars in their coffers by inflating the P/E ratio. I think that it makes more sense to look at stocks' earnings multiples ex-cash. And after backing out cash, there are some head-scratching valuations on Wall Street right now.

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